General Motors is reworking its EV strategy in North America and is pulling back from efforts to challenge Tesla's lead in the US electric vehicle segment amid slowing EV sales growth, rising labor costs, and a bleak economic outlook.
The company said during today's Q3 2023 earnings call that it is also abandoning a goal to build 400,000 electric vehicles from 2022 through mid-2024.
GM CEO Mary Barra had reiterated that target in July, but that was before the UAW strikes began consuming cash – the automaker estimates the strikes have cost it $800 million so far and the costs increase by $200 million for every week the strikes continue.
Still, General Motors CFO Paul Jacobson said GM's "real focus is getting to 1 million EVs of production by the end of 2025 alongside hitting our margin targets." Mary Barra said the company's EV strategy going forward will be to match production to demand to avoid deep discounts.
"We are also moderating the acceleration of EV production in North America to protect our pricing, adjust to slower near-term growth in demand, and implement engineering efficiency and other improvements that will make our vehicles less expensive to produce, and more profitable," GM CEO Mary Barra said in her Q3 letter to shareholders.
The bad news for GM's electrification efforts doesn't end here. The automaker said it is also slowing the launch of several EV models to cut costs and is cutting back on EV product spending. Delayed models include the Chevrolet Equinox EV, Chevrolet Silverado EV RST, and GMC Sierra EV. Barra said these EVs would be delayed each by "only a few months," without providing specifics.
Barra said GM will save billions thanks to a decision to redesign and relaunch the Chevrolet Bolt EV using lower-cost lithium-iron batteries. She added that GM also ditched an earlier plan to spend $5 billion on several new entry-level EVs.
Jacobson noted that GM's decision to delay retooling of the large factory in Orion Township, Michigan, to build electric pickup trucks will save $1.5 billion in capital investments in 2024.
He added that delaying the electric truck expansion will allow GM to "incorporate some of the changes and improvements that we've seen in early-stage production" and improve profit margins when the all-electric Chevrolet Silverado EV and GMC Sierra EV enter production.
From a financial standpoint, Barra said in the shareholder letter that GM has work to do to ensure it achieves "low to mid-single-digit EBIT EV margin targets in 2025" given the industry's changing pricing and demand outlook and higher labor costs.
The CEO also noted that GM needs to grow its revenue and sustain strong 8-10 percent EBIT margins in North America.
GM withdrew its 2023 financial guidance as it reported a 7.3 percent decline in third-quarter net income to $3.1 billion. Adjusted earnings before interest and taxes fell 17 percent in the third quarter to $3.6 billion, including a $200 million reduction due to the strike that began September 15. CFO Paul Jacobson said production lost so far in Q4 amounts to $600 million.